Most insurance professionals encounter additional insured coverage issues on a daily basis, and priority of coverage is sometimes part of an additional insured analysis. Policies issued by insurance carriers contain primary and noncontributory language on an increasing basis, and that language is sometimes located within a separate endorsement or may be part of the additional insured endorsement. Generally speaking, a primary and noncontributory provision modifies the policy’s other insurance provision to specify that coverage provided under the policy to an additional insured will be excess coverage unless the trade contract between the named insured and the additional insured specifically requires the coverage to be primary.
In Mazo v DCBE Contracting Inc.,[1] the policy issued by the carrier to a construction subcontractor had a primary and noncontributory endorsement similar to that described above:
If specifically required by the written contract…, any coverage provided by this endorsement to an additional insured shall be primary and any other valid and collectible insurance available to the additional insured shall be non-contributory with this insurance. If the written contract does not require this coverage to be primary and the additional insured’s coverage to be non-contributory, then this insurance will be excess over any other valid and collectible insurance available to the additional insured.
DCBE was the general contractor, and Iconic was one of the subcontractors for a construction project involving building renovations. An employee of the building’s property manager claimed he was injured when he fell through a hole that was created for replacing ductwork. The agreement between DCBE and Iconic required Iconic to obtain additional insured coverage for the owner and DCBE. The contract also contained language indicating that Iconic would obtain coverage that was primary to other insurance available to the owner, but that provision did not mention the priority of coverage for DCBE. DCBE sought additional insured coverage under the CGL policy that was issued to Iconic.
Iconic’s carrier took the position that the coverage owed to DCBE, if any, would be excess to DCBE’s own policy. In deciding various summary judgment motions, the court acknowledged that the agreement between DCBE and Iconic did not specifically require the additional insured coverage to be primary and noncontributory. Id. at *8. However, the court relied on the court of appeals decision in Pecker Iron Works of New York, Inc. v. Travelers Ins. Co., 99 N.Y.2d 391 (2003) to determine that even where a policy contains a primary and noncontributory endorsement, the coverage available to the additional insured will still be primary, even where the contract did not specifically require it to be primary. The court did not discuss the court of appeals decision in BP Air Conditioning Corp. v. One Beacon Ins. Grp., 8 N.Y.3d 708 (2007).
The court acknowledged that there are cases that have determined the issue otherwise and cited to Kel-Mar Designs, Inc. v. Harleysville Ins. Co. of New York, 127 A.D.3d 662 (1st Dept. 2015) and Poalacin v. Mall Properties, Inc., 155 A.D.3d 900 (2d Dept. 2017). The court recognized that “[i]n those cases, because the underlying contracts did not specifically require primary coverage for the additional insured, the first and second departments determined that the policies afforded the respective additional insured parties’ excess coverage rather than primary coverage.”
Regardless, the court concluded that the carrier owed DCBE additional insured that was primary: “In line with the Court of Appeals, this court determines that DCBE has primary coverage under Harleysville’s primary policy.”
Please note that the author routinely counsels her clients on this particular coverage issue and is a frequent writer on this topic as well. A webinar that she provided on the topic is also available here.
[1] Mazo v DCBE Contracting Inc., No. 161671/2013, 2019 WL 5212876, at *1 (N.Y. Co. Sup. Ct. Oct. 16, 2019)